NZ dollar little changed as investors catch breath after greenback rally

The New Zealand dollar was little changed in local trading as investors compose themselves after a 5.4 percent slide against the greenback on improving prospects for the US economy.

The kiwi traded at 80.81 US cents at 5pm in Wellington from 81 cents at 8am and 80.76 cents yesterday. The trade-weighted index was 76.38 from 76.23 yesterday.

Markets in New York and London were closed for public holidays on Monday, giving little guidance to investors in the Southern Hemisphere after sharp gains in the greenback in recent months. Traders have been more upbeat about the world’s reserve currency amid growing expectations the Federal Reserve will start unwinding its massive stimulus programme as early as this year.

“There’s a bit of consolidation going on after what’s been a pretty big run up in the US dollar over the past few weeks,” said Dan Bell, currency strategist at HiFX in Auckland. “I wouldn’t be surprised to see the kiwi dollar push up.”

Any gains in the local currency will be short-lived as the market grows increasingly focused on US economic data, Bell said.

Traders will be watching US consumer confidence when it’s published on Tuesday in New York, which is expected to continue its recovery this month.

The kiwi was almost unchanged at 83.86 Australian cents at 5pm in Wellington from 83.85 cents yesterday ahead of capital expenditure figures on Thursday which are expected to show the peak to Australia’s mining boom is in sight.

Reserve Bank governor Graeme Wheeler will deliver a speech on Thursday morning entitled ‘forces affecting the New Zealand economy and policy challenges’.

Later that day the central bank will publish its foreign exchange transactions for April, which will show the regulator’s level of intervention to hive off the peak in the kiwi.

The local currency rose to 82.42 yen at 5pm in Wellington from 81.61 yen yesterday and was little changed at 62.56 euro cents from 62.50 cents. It edged up to 53.51 British pence from 53.40 pence yesterday.

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